For Consumers, Forced Arbitration Equals Injustice

March 27, 2015

To the Editor:

“Failed by Law and Courts, Troops Come Home to Repossessions” (front page, March 17) reports on a number of problems with mandatory arbitration, including the bar against class actions. But there is an even more profound problem: that arbitrators may have a material incentive to rule in favor of financial institutions and against individual consumers.

Arbitrators are business people whose income depends on new work. Typically, each of the parties to a dispute has the power to veto people who are proposed as the arbitrator in their case. If a bank feels that a particular person has ruled against banks “too often,” it can strike that arbitrator, and select instead someone with a more agreeable track record.

Financial institutions and other big companies are repeat players. Individual consumers are not. The incentive to rule in favor of repeat players is obvious.

Congress should investigate the extent to which financial institutions exchange information on whether particular arbitrators have ruled in favor of banks and how this may influence arbitrator decision-making. At the least, there is grave potential for an appearance of impropriety that would not be tolerated in a real courtroom.

MITCHELL ZIMMERMANPalo Alto, Calif.

The writer is a lawyer who has served as an arbitrator with the American Arbitration Association.

To the Editor:

The threats that military service members face are well known, but as you reveal, many soldiers face financial risks even before they deploy. Renting a car or owning a cellphone should not be an issue keeping anyone up at night, yet “forced arbitration” and class-action ban clauses tagged on to contractual agreements can turn these basic necessities into a nightmare.

More and more, corporations are using fine print and indecipherable contracts to deny Americans their fundamental right of access to the civil justice system when they have been wronged — almost always without the knowledge or understanding of the consumer.